The Nordic country wants guarantees that any coordinated
bank oversight in Europe won’t put its lenders at a competitive
disadvantage, “regardless of whether Denmark is part of the
supervision,” Vestager said in an e-mailed reply to questions
today.

“If we, as a country outside the euro, are to join the
supervision, it will have to be on equal terms, ensuring that we
will also be in on deciding how to set up supervision,” she
said. “If a bank gets into troubles, other banks must support
it. Taxpayers will not have to pay, as in the Danish model where
banks stand up for each other.”

Denmark was the first European Union nation to pass so-
called bail-in legislation in 2010, pushing losses on to
bondholders in the event of bank insolvencies. Lenders in the
country have since faced a funding squeeze that exacerbated a
regional banking crisis and housing slump.

The European Union unveiled proposals for euro-area bank
oversight, requiring unprecedented cooperation between the ECB
and national regulators. EU leaders called for a single bank
supervisor in June as a condition of allowing euro-area banks
direct access to the zone’s firewall funds. Germany’s top
constitutional court today cleared the way for the 500 billion-
euro ($644 billion) European Stability Mechanism to become
operational later this year.

The new regulatory framework will “strengthen trust in
banks within the euro area and makes it difficult for Denmark to
stay on the side-lines,” Nils Bernstein, the Danish central
bank governor, said today in a statement. “With that in mind,
it’s important that Denmark commit to constructive negotiations
with the aim of establishing a healthy and effective solution as
well as equal terms for all countries participating.”